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Auction timing anomaly in the Japanese bond futures market

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  • Iwanaga, Yasuhiro

Abstract

This study examines the impact of investor position adjustments in the Japanese Government Bond futures market on auction days. The analysis shows significant return differences before and after auctions, with lower returns during the overnight and morning sessions of auction days likely related to broker-dealer position adjustments. Post-auction returns recover, indicating market impact. The competitiveness of auction results, measured by the auction tail (distribution of prices), negatively affects returns on bid days. Position adjustments are more prominent during high volatility, suggesting instability influences investor behavior. The findings support strategies based on auction anomalies, with pre-auction short and post-auction long positions showing superior performance. Given the lack of direct data on broker-dealer positions, these interpretations rely on inferred relationships rather than direct evidence.

Suggested Citation

  • Iwanaga, Yasuhiro, 2025. "Auction timing anomaly in the Japanese bond futures market," Finance Research Letters, Elsevier, vol. 86(PE).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pe:s1544612325019294
    DOI: 10.1016/j.frl.2025.108675
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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